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Group buying discount: Friend or foe to your business?

May 7, 2012 - Tags: Customers, Marketing, Sales

Istock 000008183427xsmallEvery day group buying websites entice customers with the daily deal. These bargains may be a great way to introduce your business to new customers, but it is wise to be wary before embracing this form of marketing. Sometimes the deals are simply too good to be true — both for the businesses offering them and the customers buying them.

Before you decide, here are some points to consider:

  • Can you handle extra traffic and costs? Some deal sites reserve the right to run your deal when they want without limiting the number of deals sold. You may need to hire extra employees and buy additional inventory in a hurry. If deals are extremely popular, both new and existing customers can be inconvenienced by long lines, limited stock, and poor service.
  • Will you provide your usual level of service? You may be tempted to match your service to the cut-rate coupon price, but it makes more sense to stick to your usual high standards. Angry customers who don't get the service they expect may damage your brand.
  • Are you attracting the right customer? Some new customers are only after bargains, so you may not see them again when regular pricing is back in effect. Also, they may alienate your employees with lower tips.
  • How much of a discount should you give? Most of the group discount companies prefer large discounts and will take a commission, too. Be sure you understand the terms of payment before you accept. If you lose money with each coupon sold, it may not be such a great deal for you.
  • What should the expiry date be? Make sure you are aware of provincial or territorial regulations on expiry dates as they vary from one to another. Some coupons never expire.

Many business owners may find group discounts a great way to attract new customers. For others, it can be the worst business decision they've ever made. Think it over carefully, read the fine print, be sure that you're prepared, and greet each new customer with a smile that shows you're interested in building a long-term relationship.

Check out the Pricing section to get tips on how you can set a good price for your products or services. For more on risk management, take a look at Protecting your business.

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